Relationships and Trading

What if relationships and marriage could be approached in terms of transactional analysis? Or to express it more succinctly and appropriately for Market Tamer Blog readers – in what ways can we discuss marriage through the same terminology that traders use when analyzing stocks and options?

Well, to start with, pay no attention to those online dating and matchmaking services that purport to use the power of the computer to create “ideal matches”. With no offense intended toward any vendor peddling the wonders of “Algorithms”, those mathematical number crunchers are fantastic for creating high expectancy trades and scientific breakthroughs; however, the will of the human mind and the affections of the human heart are far too complex for any machine to master.

Therefore, alas, the search for one’s mate must begin with tools that require much more effort and consume much more time than a simple daily search for “Algo trading candidates”. The tools needed to find a great partner draw upon uniquely human abilities such as intuition, attraction, and empathy. Although this process requires practice and concerted effort, once these “tools” are sufficiently exercised and the mind and heart have accumulated an adequate amount of “feedback” from time spent with potential mates, they become more effective and more dependable.

At that point, some terminology from the stock and options world does provide helpful insights. For example, unlike the trading world, within which the quality of the “underlying” stock can be evaluated on the basis of key externals, such as cash per share, earnings per share, revenue or sales growth, or corporate “guidance” regarding the upcoming quarter… within the world of relationships, there are very few helpful, dependable “externals”. Apple Corporation (AAPL) may be appealing to Einhorn and countless traders because of its vault loads of “cash on hand”; but in a relationship, a potential partner’s “cash on hand” will guarantee neither relational happiness nor longevity (despite countless jokes to the contrary). Of course, most folks will point out the importance of physical externalities (e.g. being handsome, beautiful, or “hot”). But those do not ensure longer-term success either, since such externalities are fragile (an accident can disfigure them) and fleeting (time erodes them).

What is of central importance within relationships are qualities (variables, if you will) that can not easily be seen with the naked eye. The most important of these variables is the human will and self-discipline. No trader has ever experienced instant, sustainable, complete profitability and success. Instead, she/he has had to endure (and learn from) an endless series of losses and profits. Many such traders soon “drop out”, despairing of ever achieving long-term success. Those are the traders who fall short of the “will” to succeed… who aren’t strong enough to “hang in there” and not become discouraged. They choose to take the “easy way” and simply quit. What separates the successful trader from those who quit are realistic expectations, determination, and self-discipline – or more simply, the “will” to succeed.

Those traders know that long-term success does not come through a linear, steadily upward trending line, but rather through a long series of ups and downs which, through time, trading discipline, and experience, begins to take on an upward sloping curve. That quality is what is most essential for a successful relationship or marriage.

Along the way, “Delta” is crucial. The willingness and ability to change, to be flexible, to adapt, and (most importantly) work in concert with one’s partner to achieve synergies of success as a couple is an even more powerful force within relationships than it is with portfolio construction!!

Students of “the Efficient Frontier” theory of asset allocation will tell you that the optimal utilization of “non-correlated” assets within a portfolio (e.g. combining stocks with a mix of bonds, real estate, timber, grains, and gold, etc.) will maximize one’s profits for any given (acceptable) level of risk. That works powerfully within the investment world.

When we move into the world of relationships, however, I contend that coordinating with one’s partner – duplicating here, complementing there, but never actively “opposing” one another – will most likely result in synergies of success that can exceed one’s expectations, because such successes are greater than one could ever achieve alone!

Moving on, each couple must be alert to the dangers of “Theta Decay” – the tendency for a relationship to lose luster and strength (and value) through the passage of time. Just as each trader must be regularly attentive to both the fundamentals and technicals at work within the markets, so those who are in relationship with one another must regularly be attentive to the feelings, fears, hopes, and hurts of “the other”. As the need arises, “adjustments” must be made, just as in the world of trading!

However, it must be clear from the start that, unlike in the world of trading, within which a valid adjustment can be “hedging”, there can be no “hedging” in relationships!! Relational “hedging” is a sign of weakening commitment, which never bodes well for long-term success. Hedge all you want with your stocks and options, but never hedge with your partner! It is a warning of trouble ahead, and possibly even a harbinger of ultimate defeat.

So here is hoping that all of your important relationships are sloping upward, that you are managing to remain above the five, eight, and twenty day exponential moving averages, and that you are experiencing synergies of success beyond your wildest dreams!

On this weekend, that particular wish is directed in a special way toward Ron Haydt, whose personal journey has brought him to the point of joining his life with another! May Ron and his new bride find true, lasting happiness! May they never find themselves “hedging”; but instead, may they discover together “synergies of success” beyond even our very warm hopes and dreams for them!

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